Up-Down, Good-Bad – Solar Shines Through

solar energy

No matter who wins the White House next year, federal solar tax incentives could be in danger.

A lot is on the line with the soon-coming presidential election, not the least of which is the status of the 30 percent investment tax credit for solar projects.  As things currently stand, this solar incentive expires at year’s end 2016; but that could change, with government subsidies potentially on the chopping block.  But even with the vulnerability of federal incentives for solar systems, there are signs which strongly indicate that solar installation will continue to steadily rise.

To cut our nation’s deficit and pull back on federal spending, Congress will likely target government subsidies, such as solar tax credits.  This is true whether the Democrats or Republicans win the White House on November 6th.

As frustrating as it can be that both sides of the aisle have trouble getting things accomplished in Washington, an impasse as regards the solar tax credit could be a very good thing for the solar industry.  It would mean that residential and commercial buyers of solar systems in New Jersey, Massachusetts, Wisconsin, or anywhere in the U.S. could continue to get a 30 percent reduction on their tax bills on the cost of purchasing and installing a new solar energy system.

Federal and state incentives have been essential to the remarkable growth of solar energy usage in recent years.  But as much as a deadlock in Congress seems a good possibility, there’s also a chance that automatic cuts could occur as a result of breaching the so-called “fiscal cliff” on the 1st of January.  If this happens, 8 percent would automatically be cut from the amount of government payouts applied to solar projects; this would, no doubt, lend uncertainty to some solar energy projects slated for 2013.

solar energy

Despite set-backs, renewable energy in the United States has increased in the past four years.

Whatever happens in Congress, however, the facts about energy in the U.S. paint a sunny picture.  In just the past four years, the percentage of our electricity supplied by non-hydroelectric renewables such as solar has doubled and is up to almost 6 percent.

When looking at the solar industry in the U.S., it’s not difficult to see that the manufacturing side has suffered some serious blows, the most famous of which is the Solyndra story.  This solar panel manufacturer out of California was the recipient of a $535 million loan guarantee from the government and yet filed for bankruptcy in September of 2011.

But the solar industry isn’t alone in experiencing painful setbacks caused by intense competition; it happens with most growing industries.  What happened in the case of solar is that China made enormous investments in production capacity and drove the cost of solar panels down a whopping 65 percent.  Few manufacturers can compete with this type cost reduction; many went out of business.

But the dilemma faced by manufacturers didn’t affect the entire solar industry.  In fact, solar cell manufacturers in the U.S. only make up about 3 percent of the approximately 100,000 jobs in solar.  The fastest growing sector encompasses the budding companies which sell, install, and service solar photovoltaic (PV) systems.  Homeowners and businesses across the U.S. are taking advantage of the reduced cost of installing a solar PV system.

alternative energy

Germany now fulfills 50 percent of its energy needs with alternative energy.

Solar has been growing at a rate of 30 percent annually.  If you figure in the power of exponential growth, it’s reasonable to assume that solar and other renewables could provide a significant portion of our electricity within about a dozen years.  The proof that it isn’t far-fetched is in looking at the way Portugal went from 17 percent renewable energy sources to 45 percent in only five years.  Germany began generating a full 50 percent of its peak electricity needs with solar as of May 2012, which set a world record.

Since subsidies are the catalyst behind the huge growth of solar installations in the U.S. in recent years, will families and businesses in New Jersey, Massachusetts, Wisconsin, and elsewhere in the U.S. lose interest in investing in solar, should the federal incentives be cut?  No, not if they want to take advantage of falling upfront costs and the opportunity to have reduced energy costs for decades to come.

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